The potential failure of a large bank presents vexing questions for policymakers. It poses
significant risks to other financial institutions, to the financial system as a whole, and possibly …

It is widely believed that diversification at financial institutions benefits the stability of the
financial system. This paper shows that it also entails a cost: even though diversification …

This paper shows that an increased liquidity of bank assets, paradoxically, increases
banking instability and the externalities associated with banking failures. This is because …

We study ex post efficient policy responses to a run on the banking system and the ex ante
incentives these responses create. We show that the efficient response to a run is typically …

This article uses narrative and numerical examples to exposit the ideas in Diamond and
Dybvig (1983) and some recent extensions of their model. Banks create demand deposits to …

We construct an endogenous growth model in which bank runs occur with positive
probability in equilibrium. In this setting, a bank run has a permanent effect on the levels of …

We use experimental methods to investigate what factors contribute to breakdowns in
coordination among a bank's depositors. Subjects in our experiment decide whether to …

In this paper I ask whether a central bank policy of providing liquidity to banks during panics
can prevent bank runs without causing moral hazard. This kind of policy has been widely …

We report experimental evidence on the effect of observability of actions on bank runs. We
model depositors' decision-making in a sequential framework, with three depositors located …

We investigate how coordination requirement, measured by the coordination parameter,
affects the occurrence of miscoordination-based bank runs in controlled laboratory …